China is under immense pressure to provide both a smooth and secure trade environment considering their role as one of the leading merchandise traders in the world. Cumbersome Custom formalities imposed on imports and exports have caused issues for the entire industry.
Suppose a company is located and registered in a landlocked province like Jiangxi or Sichuan where their inbound ocean freight will first land in coastal areas such as Shanghai, Shenzhen, or Xiamen. Traditionally, the company would be required to clear its imports with customs at the point of entry which means important decisions, physical inspections of goods, and taxes/duties all occur with your business presence and support hundreds of miles away.
There is a process available called Customs transit through which the importer can bring the freight back to its registration place for a local clearance. However, it is not easy to do in practice because:
- It is difficult to get Customs to transit approval from coastal Customs
- The cost of moving cargo under Customs supervision can be extremely high
To make matters even worse there are 41 Customs districts directly under the leadership of the General Administration of Customs (GAC) and each province has at a minimum one Customs district. The Customs districts act relatively independent of each other as they have jurisdiction over their own territory. Consequently, traders are confronted with inconsistent Customs enforcement; a classification ruling made by one district may be denied in another.
China Customs created the Regional Customs Clearance Integration (RCCI) to address the segmentation issues and provide the inland provinces with an economic boost. The first pilot program under the initiative was launched on July 1, 2014 and involved two Customs districts, namely Beijing and Tianjin. The RCCI aims to foster a totally cohesive environment among all the Customs districts.
Under the RCCI if a company located and registered in Beijing has an inbound shipment that has just arrived in the Tianjin port, the company can clear imports when it reaches Beijing. Tianjin Customs will release the goods based on an internal notification from Beijing Customs.
Depending on the nature and scale of their businesses, economic operators can make enormous savings by utilizing RCCI. Customs clearance can be faster which means decreased warehousing costs, savings in human resources and operational costs by handling business locally, and opportunities to reengineer the supply chain to maximize dividends.
The RCCI program unifies Customs enforcement standards, terms, and processes in regards to imports and exports in order to reduce inconsistency. The command and communication center established in each RCCI region will resolve any additional disputes in a timely manner.
Customs brokerage in China is about to change. The RCCI unification initiative is not limited to the public sector. A Customs broker can now extend its services from one Customs district to all other Customs districts covered by the same RCCI program. This is good news for both Customs brokers and trading companies because the former has a chance to expand their market while the latter has a greater variety in brokerage services. Traders will now be able to consolidate their needs and collaborate with fewer brokers to have a more efficient and scale economy.
Under the RCCI, no matter who you are, what you export, and how much you import/export, you are eligible for the facilitated clearance mode if your business is located and registered within a RCCI region. Fortunately, China Customs has committed to roll out the program nationwide following the success of the Beijing and Tianjin pilot program.
RCCI programs now cover all Mainland China territory and 41 Customs districts have been integrated to form five RCCI regions. Following this trend it would not surprise me if China Customs announces that the five RCCI regions will soon merge into one Customs for one China.
If you have any questions, feel free to reach out to our customs compliance consultants at Tradewin China. We're happy to help!
